To write off Discount on issue of debentures following entry is made:

The correct answer is option 3-
Securities Premium Reserve A/c./Statement of Profit and Loss Dr.
       To Discount on Issue of Debentures A/c.

 

Discount or Loss on issue of debentures is a capital loss and is written-off in the year when debentures are issued. Discount or loss can be written-off from securities premium reserve [section 52(2)]. In case, capital profit do not exist or are inadequate, the amount should be written off against revenue profits of the year. The journal entry passed is—
Securities Premium Reserve A/c Dr.
Statement of Profit and Loss [If exists to the extent of balance] Dr.
       To Discount/Loss on Issue of Debentures A/c
(Discount/Loss on issue of debentures written-off)